Heartland Institute Experts React to Fed Chairman Bernanke Testimony

Published July 17, 2013

Federal Reserve Chairman Ben Bernanke testified on Capitol Hill today that
the Fed’s short-term interest rate is likely to stay near zero “for the
foreseeable future.”

The following statements from finance policy experts at The Heartland Institute – a
free-market think tank – may be used for attribution. For more comments, refer
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“Fed Chairman Ben Bernanke essentially said he doesn’t know where the economy
is headed or when it will get there. He’s guessing. It’s astonishing that one
man presumes to try to exercise such control over the lives of more than 300
million Americans and tries to influence economies around the world. It’s even
more astonishing that we are forced to let him.”


Research Fellow, Budget and Tax Policy
The Heartland
Managing Editor, Budget & Tax News
[email protected]


“The testimony today by Federal Reserve Chairman Ben Bernanke made it fairly
clear that for the foreseeable future, the Fed will continue to follow its
highly ‘easy money’ policy.

“This means that the latest round of ‘quantitative easing’ will result in the
money supply being increased by over an additional $1 trillion during the 2013
calender year (based on monthly Fed purchases of U.S. government securities and
U.S. agency mortgages of $85 billion per month). Unless the Federal Reserve
devises an effective and stable ‘exit strategy’ for reining in the over $3
trillion of new money it will have created in the banking system between 2008
and the end of 2013, the economy will be threatened with significant price
inflation in the years ahead.

“Chairman Bernanke also insisted that regardless of the outlook for
unemployment or price inflation in the months ahead, Federal Reserve monetary
policy will maintain a near zero rate of interest on federal funds in the
banking system and short-term U.S. Treasury securities for an unspecified period
of time.

“As a consequence, the U.S. financial markets will continue to operate
without any market-based rates of interest to inform lenders or borrowers about
the real (opportunity) costs of saving or investing. This runs the high risk of
generating a wide range of unsustainable and misdirected investment decisions
that may set the stage for another financial crisis at some point in the

“All-in-all, the current Federal Reserve monetary and interest rate policies
are running the risk of producing the very financial and market volatility that
Chairman Bernanke says the Fed is trying to prevent.”

Dr. Richard

Professor of Economics
Northwood University


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